Compare and contrast the burden of internally financed debt to externally financed debt.
What will be an ideal response?
The debt held by U.S. households and institutions is known as the internal debt. The burden of the internal debt is the opportunity cost of the debt-financed activities. If the private sector lends the dollars to the government and it spends the dollars, then the private sector has given up the option of choosing certain output. Internal deficit financing changes the mix of output toward more public sector goods. The debt held by foreign households and institutions is known as the external debt. At the time the debt is sold externally, there are no opportunity costs. The costs occur when the debt is repaid in the future with the export of U.S. goods and services or the selling of real assets such as land or factories.
You might also like to view...
Despite the outlays by the federal and state governments, many observers believe which of the following is true?
A. Public infrastructure, such as bridges and roads, is only adequate. B. Our educational system is lacking. C. Too little is spent on homeland defense. D. All of these are correct.
Suppose that the Federal Reserve Open Market Committee adheres to the ideas expressed by ________
If the economy moves into a recession, the Fed would recommend that the federal funds target rate decrease as long as the inflation rate did not rise above the publicly announced goal for inflation. A) the Taylor Rule B) the gold standard C) the monetarist school of thought D) inflation targeting
What is the current limit on balances that are covered by federal deposit insurance?
A) $100,000 B) $250,000 C) $500,000 D) $1,000,000
Refer to the above figure. If the farmer has 50 acres of land, the farmer is producing at point a, and an acre of land yields 400 bushels of beans or 800 bushels of wheat, how much land is devoted to the production of wheat?
A) 8.5 acres B) 10 acres C) 12.5 acres D) 15 acres